Business Daily

Work 'won't pay' for some parents

MANY single parents will be no better off if they work longer hours under the Government's flagship universal credit reforms, according to a report.

Work and Pensions Secretary Iain Duncan Smith has repeatedly said that the new credit - which replaces a range of benefits and tax credits for jobless people - will "make work pay" for the poorest in society and ensure that those who take on more work receive a financial benefit from it.

But the report for the single parent charity Gingerbread found that one-parent families on the minimum wage will be left on or below the poverty line, and that working longer hours will have only a "negligible" effect on their net incomes.

Because of the cost of childcare and housing - not all of which will be covered by universal credit - some of the poorest families will even see their disposable incomes fall if the parent takes on more work, according to the report by Donald Hirsch, director of the Centre for Research in Social Policy at Loughborough University.

The report also found that a more generous universal credit would be many times more helpful to the poorest single-parent households than the Government's increases in tax allowances. The £1,000 rise in the allowance introduced last year cost £3.3 billion but left typical low-paid single parents only about £1 a week better off, while spending the same amount on universal credit would have helped them to the tune of £24, it said.

Almost two million single-parent households will start to move on to universal credit from next year. The report found that, under the new system, it will pay for single parents to take on part-time work, even at the minimum wage of £6.19 an hour.

But it found that, because of the way the credit is designed, many families will swiftly find themselves stuck on a "financial plateau" where working longer hours will not increase their income once housing and childcare are taken into account.

Under the universal credit, a single parent with a child aged one would gain significantly by working up to 10 hours on the minimum wage. But for every additional hour worked after that, the family would only gain around £1.50 in income, with the rest lost in reduced universal credit and higher tax and national insurance. This sum would be further reduced by about £1 an hour because of the need for more childcare, leaving the family about 50p an hour better off.

Single parents with three children could actually see family income after housing and childcare decline if they work more than about 18 hours a week, even if they are on the national median average wage of £11.15 an hour, the report found.

A spokesman for the Department of Work and Pensions said: "Universal credit will make millions of people better off, including 700,000 lone parents. An extra £300 million will be spent on childcare support, so that more families will be able to take up jobs." Shadow work and pensions secretary Liam Byrne said: "The welfare revolution David Cameron promised us is fast descending into welfare chaos."